Each year, Equal Pay Day comes and goes on April 8 amid rising income inequality, low social mobility, and pay disparities for workers of color and women in our nation.
Pay disclosure has often been suggested as a way to combat pay inequity between men and women. If women knew how much their co-workers made, they would be in a better position to assess whether they receive equal pay for equal work, and, thus, to negotiate with management, so the thinking goes. But improving the negotiating position of female workers wouldn’t be the only effect of pay disclosure.
My recent research suggests that pay transparency in some workplaces has the potential to boost economic output by improving the productivity of workers. In a field experiment, I divided people into two groups. One group was given information about the earnings of others performing similar work at the same piece rate as them, and the other group was kept in the dark about their peers’ earnings. By comparing the differences between the groups, I could see the effect of pay transparency on these workers.
What I found was that people in the group shown their relative earnings position were more productive than those that weren’t given that information. In fact, the work output of those in the informed group increased by about 10 percent after they learned their relative positions.